Indian Companies Act empowers Board of Directors to take most of the business decisions. However, there are certain matters which affect the shareholders which can only be approved in Shareholders meeting. Some of the matters which can be proceeded with only after shareholders’ approval in their meeting are:
Shareholders meetings are held at any place in India. The quorum requires shareholders to be personally present at the meeting. These are certain constraints to convene and hold meeting with proper quorum at a venue, especially when shareholders are non-residents, they may not be available in India.
Due to this there were several amendments to the Companies Act, 2013 (Act) brought in by the Ministry of Corporate Affairs to ease out these constraints. These have been discussed as below.
As per Section 100:
The Board may, whenever it deems fit, call an extraordinary general meeting of the company. [Provided that an extraordinary general meeting of the company, other than that of the wholly owned subsidiary of a company incorporated outside India, shall be held at a place within India]
This amendment brought in a greater comfort to wholly owned subsidiaries of Foreign Company to conduct EGM even outside India.
As per Section 103(1) (b), in case of a private company, two members personally present, shall be the quorum for a meeting of the company.
A member can appoint a proxy in case he is unable to attend however such proxy shall not counted for quorum. Without quorum, it will not be considered as a valid meeting and therefore, business can’t be transacted.
To overcome the above problem concerning quorum, MCA vide notification dated 5th June 2015 has specified that provisions in section 103 will not apply to a private limited company if Articles of the Company do not constrain the members to be personally present. So, a private limited Company may amend its Articles in a manner which allows proxy to be counted towards the quorum.
Sample Clause: “Two Members present in person or proxy shall be a quorum for a General Meeting. No business shall be transacted at any General Meeting unless a quorum of Members is present at the time when the meeting proceeds to business.”
Below is an easy reference table where Venue shall be any place in India and Quorum requirement shall be as under:
| Sr. No | EGM | Quorum |
| 1. |
Indian Company where shareholders are individuals |
Two members Personally present |
| 2. |
Indian Company where one shareholder is individual and the other is corporate shareholder |
Individual shareholder and Authorized representative of corporate Shareholder need to be present |
| 3 |
Indian Company which is Subsidiary company of Foreign company where one shareholder is Indian Individual and the other is Foreign Individual |
Two members Personally present. In case of Foreign Individual he can either be present at the meeting personally or A proxy can be appointed by Foreign Individual though a Proxy wouldn’t be counted for Quorum unless a company should have in its Articles, a clause which recognizes appointment of Proxy and counting him for Quorum for EGM (Pursuant MCA Exemption notification to Private companies date 05th June 2015) |
| 4 |
Indian Company which is Subsidiary company of Foreign company where shareholder are Individuals- Indian Corporate and Foreign Individual |
Same as above |
Indian Company which is wholly owned Subsidiary Company of Foreign Company can hold meeting outside India. Two members personally present shall be the quorum (Nominee shareholder and Authorized representative) and proxy may also be counted for quorum if Articles provides so.
A proxy wouldn’t be counted for quorum unless a company should have in its Articles, a clause which recognizes appointment of Proxy and counting him for Quorum for shareholders’ meeting.
The Companies now, can take decisions at a much faster pace. The constraints of venue and availability wouldn’t prove to be hindrance where time is of the essence as meetings can be held anywhere in India or in case of wholly owned Subsidiary Company of Foreign Company -outside India.
MCA vide notification dated 5th June 2015 has specified that provisions in section 103 will not apply if Articles of the Company do not require the members to be personally present.
Can you please name the case laws or any practical examples of companies who have allowed proxies to be considered for the purpose of quorum in their Articles of Association?
The relaxation of counting proxies for the purpose of quorum has been allowed to private companies w.e.f. MCA Notification dated 5th June, 2015. The step makes a lot of sense considering the minimum number of shareholder requirements and foreign presence of shareholders in private companies. As per our limited research, no recent case law has been found related to this aspect. Further, Companies do not announce such specific clauses of their Articles as they relate to internal workings of the Company.